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Government kicks off consultations on unfair contracts

The federal government has launched its next phase of consultation on unfair contract term protection, after being accused of dragging its heels on the issue.

Government kicks off consultations on unfair contracts
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  • Maja Garaca Djurdjevic
  • December 18, 2019
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Following the March 2019 review of the current protections, late last week the government announced the commencement of public consultation on options to further enhance UCT protections.

The consultation will seek feedback on a range of options, including making UCTs illegal, attaching penalties for breaches, and broadening the coverage of small business contracts.

The Australian Small Business and Family Enterprise Ombudsman Kate Carnell has welcomed the opportunity to advocate for stronger unfair contract term protections for small businesses.

“We look forward to continuing to champion improved protections for small business as part of this consultation process, but it’s been a long time coming,” said Ms Carnell.

“While we support this thorough process, the time for meaningful change can’t come soon enough.

“Small businesses have waited long enough, so we’d encourage the government to make this a priority.”

The consultations will run until March 2020. In a statement issued by Assistant Treasurer Michael Sukkar and Minister for Employment, Skills, Small and Family Business Michaelia Cash on Friday, the pair recognised the need for stronger protection.

“Small businesses often lack the resources to identify unfair terms and to engage in negotiations over those terms. By strengthening the UCT protections, small businesses will get a fairer go,” Minister Cash said.

Responding to the announcement, Ms Carnell noted that while her office is able to resolve many contract disputes by using the unfair contract term provisions as a lever, on occasions when these negotiations fail, a small business is forced to seek a ruling through the courts.

“This can be very costly for small businesses and when a larger company has more resources to delay proceedings, this can lead to small businesses giving up or going out of business,” she said.

“That’s why it is our position that regulators should be given enhanced enforcement capabilities to determine and deal with unfair contract term cases.

“Unfair contract terms should be made illegal and penalties should apply to breaches.”

Ms Carnell suggested that the legislation should be extended to cover contracts up to $5 million, as the most common standard form contract for a small business is with its financial services provider.

“My office will vigorously advocate for a change in how small businesses can challenge unfair contract terms outside the court system in our comprehensive submission to the consultation process,” she said.

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